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Arizona Court of Appeals Decision in $8.475 Million Construction Defect Class Action Suit

May 09, 2011 — CDJ STAFF

In the case of Leflet v. Fire (Ariz. App., 2011), which involved an $8.475 million settlement in a construction defect class action suit, the question put forth to the Appeals court was “whether an insured and an insurer can join in a Morris agreement that avoids the primary insurer’s obligation to pay policy limits and passes liability in excess of those limits on to other insurers.” The Appeals court provided several reasons for their decision to affirm the validity of the settlement agreement as to the Non-Participatory Insurers (NPIs) and to vacate and remand the attorney fee awards.

First, the Appeals court stated, “The settlement agreement is not a compliant Morris agreement and provides no basis for claims against the NPIs.” They conclude, “Appellants attempt to avoid the doctrinal underpinnings of Morris by arguing that ‘the cooperation clause did not prohibit Hancock from assigning its rights to anyone, including Appellants.’ This narrow reading of the cooperation clause ignores the fact that Hancock did not merely assign its rights — it assigned its rights after stipulating to an $8.475 million judgment that neither it nor its Direct Insurers could ever be liable to pay. Neither Morris nor any other case defines such conduct as actual ‘cooperation’—rather, Morris simply defines limited circumstances in which an insured is relieved of its duty to cooperate. Because Morris agreements are fraught with risk of abuse, a settlement that mimics Morris in form but does not find support in the legal and economic realities that gave rise to that decision is both unenforceable and offensive to the policy’s cooperation clause.”

The Appeals court further concluded that “even if the agreement had qualified under Morris, plaintiffs did not provide the required notice to the NPIs.” The court continued, “Because an insurer who defends under a reservation of rights is always aware of the possibility of a Morris agreement, the mere threat of Morris in the course of settlement negotiations does not constitute sufficient notice. Instead, the insurer must be made aware that it may waive its reservation of rights and provide an unqualified defense, or defend solely on coverage and reasonableness grounds against the judgment resulting from the Morris agreement. The NPIs were not given the protections of this choice before the agreement was entered, and therefore can face no liability for the resulting stipulated judgment.”

Next, the Appeals court declared that “the trial court abused its discretion in awarding attorney’s fees under A.R.S § 12-341.” The Appeals court reasoned, “In this case, the NPIs prevailed in their attack on the settlement. But the litigation did not test the merits of their coverage defenses or the reasonableness of the settlement amount. And Plaintiffs never sued the NPIs, either in their own right or as the assignees of Hancock. Rather, the NPIs intervened to test the conceptual validity of the settlement agreement (to which they were not parties) before such an action could commence. In these circumstances, though it might be appropriate to offset a fee award against some future recovery by the Plaintiff Leflet v. Fire (Ariz. App., 2011) class, the purposes of A.R.S. § 12-341.01 would not be served by an award of fees against them jointly and severally. We therefore conclude that the trial court abused its discretion in awarding fees against Plaintiffs ‘jointly and severally.’”

The Appeals court made the following conclusion: “we affirm the judgment of the trial court concerning the validity of the settlement agreement as to the NPIs. We vacate and remand the award of attorney’s fees. In our discretion, we decline to award the NPIs the attorney’s fees they have requested on appeal pursuant to A.R.S. § 12-341.01(A).”

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Insurer's Attempt to Strike Experts in Collapse Case Fails

February 03, 2020 — Tred R. Eyerly - Insurance Law Hawaii
The insurer's efforts to exclude two of the insured's experts in a collapse case were unsuccessful. Hudon Specialty Ins. Co. v. Talex Enterprises, LLC, 2019 U.S. Dist. LEXIS 150148 (S.D. Miss. Sept. 4, 2019). The insureds' building collapsed. The remaining portions of the building required immediate stabilization. The insureds hired Mr. Laird, an engineer, to prevent further property destruction. The insured designated Mr. Laird as a non-retained expert for trial. Mr. Laird's report claimed that the collapse was caused because the building had been re-roofed many times without removal of the degraded underlying roofing materials, thereby adding additional weight to the roof structure. The insureds also designated Steve Cox as a non-retained expert. Mr. Cox was an architect who owned property neighboring the building that collapsed. He opined that the building collapsed because of the condition of very old mortar and not because of water standing on the building roof or because of roof repairs. Hudson sought to strike these two experts because their opinions were inconsistent with the admitted facts. A document produced by the insureds stated that a large amount of rainwater had collected on the roof and the weight of the rainfall was the proximate cause of the collapse. Hudson claimed that this statement qualified as a judicial admission, removing the question of causation from contention. The court disagreed that the statement was a judicial admission because it did not form any part of the pleadings. The statement may have been an evidentiary admission that could be controverted or explained by the parties. Read the court decision
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Reprinted courtesy of Tred R. Eyerly, Damon Key Leong Kupchak Hastert
Mr. Eyerly may be contacted at te@hawaiilawyer.com

Suffolk Stands Down After Consecutive Serious Boston Site Injuries

May 23, 2022 — Scott Van Voorhis - Engineering News-Record
After two serious safety incidents in consecutive days, the Boston-area’s largest contractor voluntarily issued a safety stand down on all projects in Boston through May 6. Reprinted courtesy of Scott Van Voorhis, Engineering News-Record ENR may be contacted at enr@enr.com Read the full story... Read the court decision
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Brenner Base Tunnelers Conquer Peaks and Valleys in the Alps

October 21, 2019 — Scott Blair - Engineering News-Record
A logistics tangle decades in the unraveling, the Brenner Base Tunnel project is having a banner year. Twin tunnel boring machines in May were released on their relentless journey to mine the main tunnels underneath the Alps between Austria and Italy, while a multinational crew of 2,400 workers armed with a toolkit of just about every mining technique is swarming four major worksites, including a particularly challenging area where workers must undercut a river and pass through the fast-flowing aquifer below it. Read the court decision
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Reprinted courtesy of Scott Blair, ENR
Mr. Blair may be contacted at blairs@enr.com

No Additional Insured Coverage for Subcontractor's Work Outside Policy Period

August 19, 2015 — Tred R. Eyerly – Insurance Law Hawaii
In a dispute between two insurers, the district court determined that the contractor was not an additional insured under the subcontractor's policy. Navigators Spec. Ins. Co. v. St. Paul Surplus Lines Ins. Co., 2015 U.S. Dist. LEXIS 79338 (N. D. Cal. June 17, 2015). McDevitt & McDevitt Construction Corporation was the general contractor for construction of a condominium complex. McDevitt was insured by Navigators Specialty Insurance Company. F&M was a subcontractor for the project for providing structural steel components. F&M's subcontract required it to obtain liability insurance and name McDevitt as an additional insured under a policy that was to be primary. F&M secured a policy with North American Capacity Insurance Company (NAC) which included an endorsement for additional insureds. The endorsement provided that an entity could be an additional insured only with respect to "occurrences resulting from work performed by you during the policy period, or occurrences resulting from the conduct of your business during the policy period." McDevitt and F&M were sued for construct defect claims. Navigators defended McDevitt and NAC defended F&M. Navigators tendered McDevitt's defense to NAC because McDevitt was an additional insured under NAC's policy. NAC disclaimed coverage. Read the court decision
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Reprinted courtesy of Tred R. Eyerly, Insurance Law Hawaii
Mr. Eyerly may be contacted at te@hawaiilawyer.com

The ‘Sole Option’ Arbitration Provision in Construction Contracts

July 16, 2014 — Beverley BevenFlorez-CDJ STAFF
On his Best Practices Construction Law blog, Matthew Devries discussed how the “at its sole option…has the right to demand arbitration” can “be a good provision if you are the party who has that option.” For instance, Devries cites the case Archer Western Contractors, LLC v Holder Construction Company, where “the Georgia Court of Appeals recently affirmed the trial court’s decision to grant a contractor’s motion to compel arbitration with a ‘sole option’ provision.” Devries stated that “it is important to review carefully the disputes clause in your construction contract to fully understand who has the right to demand arbitration and what rules will apply.” Read the court decision
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Court Dismisses Coverage Action In Lieu of Pending State Case

July 25, 2021 — Tred R. Eyerly - Insurance Law Hawaii
The insurer's coverage action was dismissed by the federal court in favor of the pending case in state court. Southern-Owners Ins. Co. v Marquez, 2021 U.S. Dist. LEXIS 108125 (S.D. Fla. May 4, 2021). The underlying lawsuit was filed because of of an incident involving a golf cart on a sidewalk owned by the AOAO. The Marquezes owned the golf cart that injured the Murphy's child. Southern-Owners issued a CGL policy to the AOAO. The Marquezes submitted a claim to Souther-Owners for coverage in the underlying lawsuit as additional insureds under the policy. Southern-Owners defended the AOAO and the Marquezes in the underlying lawsuit pursuant to a reservation of rights. The underlying complaint alleged that the Marquezes negligently permitted their daughter to operate the golf cart on the AOAO's pedestrian walkway. Further, the AOAO negligently failed to reasonably maintain the premises. Read the court decision
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Reprinted courtesy of Tred R. Eyerly, Damon Key Leong Kupchak Hastert
Mr. Eyerly may be contacted at te@hawaiilawyer.com

Connecticut Supreme Court Finds Duty to Defend When Case Law is Uncertain

October 12, 2020 — Eric B. Hermanson & Austin D. Moody - White and Williams
The Connecticut Supreme Court recently addressed whether an insurer has a duty to defend when faced with legal uncertainty as to whether coverage is owed: for example, when there is no Connecticut case law on point, and courts outside of the state have reached conflicting decisions. The Court suggested that an insurer, in these circumstances, should defend the insured, and should seek a declaratory judgment from a court as to whether coverage is owed. The issue in Nash St., LLC v. Main St. Am. Assurance Co.,[1] arose out of a home collapse in Milford, Connecticut. The owner of the home (Nash) hired a contractor (New Beginnings) to renovate the home. New Beginnings, in turn, retained a subcontractor to lift the house and to do concrete work on the foundation. While the subcontractor was lifting the house, the house shifted off the supporting cribbing and collapsed. Reprinted courtesy of Eric B. Hermanson, White and Williams and Austin D. Moody, White and Williams Mr. Hermanson may be contacted at hermansone@whiteandwilliams.com Mr. Moody may be contacted at moodya@whiteandwiliams.com Read the court decision
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